Shareholder Lawsuit Could Set 12b-1 Precendent

A lawsuit challenging conventional methods for mutual funds to collect marketing fees from shareholders cleared a significant hurdle last week in a New York federal court, The Wall Street Journal reports.
The plaintiff suing Bjurman, Barry & Associates and Bjurman and Barry Micro-Cap Growth Fund for charging excessive fees received a green light to proceed when the judge overturned a motion to dismiss the case.
The decision comes dangerously close to setting a precedent for shareholders to challenge mutual fund fees in court at a time when investment providers are facing regulatory scrutiny for improper trading practices. Investor advocates are also becoming more vocal about the practice of collecting marketing expenses, also known as 12b-1 fees, for mutual funds that are closed to new shareholders.
Experts are paying close attention to the lawsuit against Bjurman because it solely contests lofty 12b-1 fees in a fund that is closed to new investors. Other mutual fund providers now worry that a victory in the Bjurman case could open floodgates for other lawsuits. The case has survived, experts say, because the current regulatory climate is sympathetic to investors.